I just read in the Globe and Mail that treason in Russia is being redefined loosely such that it could include just about anything that the authorities wanted it to include.
I refuse to hold back any criticism of the moves made by Harper last month. There is no doubt in my mind that they would have undermined the strength of democracy in Canada (and perversely may have strengthened it due to the failure of his plan)
... BUT, positioned along side Putin he seems positively angelic right about now. Is this a matter of character or due to the differing political realities of the countries? I have no idea.
All in all, this is a very sad day for the people of Russia. I wonder if they even know it. I wish I could read Russian to see what kind of propaganda is being produced on the topic right now.
Put together with increasing anti-Westernism fomented by the Russian government, I can't help but wonder if NATO might want to think long and hard about the potential implications of a recent cartoon in the Economist. A bear breaks out of the cage, and a bunch of jesters have toy weapons to stop it. To complicate things, the very act of being found to make a plan is itself the equivalent of rattling the cage. However, it is my opinion that this contingency plan absolutely must be nailed down in a number of formats in utmost secrecy. More importantly, a strategy of rapprochement must be carried out post haste without selling out one bit.
Wednesday, December 17, 2008
When the facts lead you away from what's really going on
I said I was going to dispatch eugenics to the abyss. I got the outline and half of it finished, then got distracted and wrote this instead. Since I should really be studying for my last exam tomorrow, I'm just going to post this and continue on.
Further to this piece ...
Government gets unfair flack for inefficiency because it takes on stuff that is inherently difficult to do and that's why the market doesn't do it. Some political outcomes allow us to address market failures in ways that are desirable for people, rather than assuming that market solutions alone will achieve the results that are most desirable for the greatest number of people.
For example, the US has private medical insurance, yet spends a greater portion of GDP on health care than any nation in the world, yet, achieves average health care results among the lowest in the OECD.
For example, I don't suppose unemployment insurance would be very effectively offered by private markets. While slow and inefficient service by the government may effectively deter some claims, it's hard to imagine that a private market would not do even more to minimize these payments in each case. Furthermore, people in seasonal or otherwise unpredictable lines of work would not likely be able to get insurance for a decent price. While this may engender 'economic efficiency' at the surface, that doesn't mean that it's socially desirable to leave employment insurance to private markets (although if they want to sell extra coverage, why not?).
For example, many of the most profitable industries are the result of massive public investments in education and technology. For example, aerospace, health and medicine, energy technologies... Of course, market mechanisms are trusted to sort out the best business models and marketing methods, but public resources are key to technological development in many industries.
For example, private schools only provide education to families with the means or desire to spend on education. Public education develops the skills and human capital of all of society.
____________________________________
On the other side, let's consider public corporations. There is no shortage of examples of ineffective publicly-owned corporations. Let's make that absolutely clear. I'm not even going to bother starting a list here. However, there are notable exceptions.
Let's consider the Canadian mint. Forget about the fact that they print money. It sounds crazy, but the fact that these guys literally make money does not confer any ability, in and of itself, to be profitable. In recent years, successful marketing and business development and a reputation for good quality has led to the Canadian mint from a crown corporation that lost money to one that is profitable. This company competes in a global market where each national government could choose to print their money at home or in any number of places. They choose the Canadian mint. This begs a 'simple' question - what incentives were in place and what mechanisms were unique to the mandate of this organization that allowed it to be so successful in a competitive marketplace? Was it just a highly capable individual or team in the right place at the right time, or was there something institutionally correct that we can learn from this example?
Other examples such as the LCBO or Petro Canada (when largely government operated) are not entirely fair comparisons. They are highly profitable companies mostly because the government awards itself a monopoly. The efficiencies of a monopoly can be great, since there are no expensive and duplicit marketing campaigns, and locations can be strategically chosen to maximize profit while offering better average service. However, I should say again that the much of the LCBOs profits must (by economic theory) be due to the fact that they have a monopoly power to set prices. This is the reason that I choose to emphasize the example of the mint, which operates in a competitive market.
_______________________________________
We have seen here that governments fill important gaps that would be poorly served by markets. We have also seen that at least some crown corporations can operate competitively and efficiently.
Let me emphasize that I am well aware that I am making a rather one-sided argument. The other side of the argument is very well established, and is nearly an article of faith among a significant portion of society. However, it has its basis in a simplistic view of fact.
I will readily admit that governments don't tend to be as efficient as markets. The problem of perception comes from the fact that governments are active precisely where efficiency is hardest to achieve.
The facts will tell you that governments are less efficient than markets. What I have argued, is that with a little thought, we can see that much of the cause for this is that governments tackle the most challenging and unprofitable issues. Counter-intuitively, these are absolutely vital to efficient and profitable operations in markets.
This last statement is not an original point, but I think the explanation I offer for why so many people are inclined to disagree with the argument is.
Further to this piece ...
Government gets unfair flack for inefficiency because it takes on stuff that is inherently difficult to do and that's why the market doesn't do it. Some political outcomes allow us to address market failures in ways that are desirable for people, rather than assuming that market solutions alone will achieve the results that are most desirable for the greatest number of people.
For example, the US has private medical insurance, yet spends a greater portion of GDP on health care than any nation in the world, yet, achieves average health care results among the lowest in the OECD.
For example, I don't suppose unemployment insurance would be very effectively offered by private markets. While slow and inefficient service by the government may effectively deter some claims, it's hard to imagine that a private market would not do even more to minimize these payments in each case. Furthermore, people in seasonal or otherwise unpredictable lines of work would not likely be able to get insurance for a decent price. While this may engender 'economic efficiency' at the surface, that doesn't mean that it's socially desirable to leave employment insurance to private markets (although if they want to sell extra coverage, why not?).
For example, many of the most profitable industries are the result of massive public investments in education and technology. For example, aerospace, health and medicine, energy technologies... Of course, market mechanisms are trusted to sort out the best business models and marketing methods, but public resources are key to technological development in many industries.
For example, private schools only provide education to families with the means or desire to spend on education. Public education develops the skills and human capital of all of society.
____________________________________
On the other side, let's consider public corporations. There is no shortage of examples of ineffective publicly-owned corporations. Let's make that absolutely clear. I'm not even going to bother starting a list here. However, there are notable exceptions.
Let's consider the Canadian mint. Forget about the fact that they print money. It sounds crazy, but the fact that these guys literally make money does not confer any ability, in and of itself, to be profitable. In recent years, successful marketing and business development and a reputation for good quality has led to the Canadian mint from a crown corporation that lost money to one that is profitable. This company competes in a global market where each national government could choose to print their money at home or in any number of places. They choose the Canadian mint. This begs a 'simple' question - what incentives were in place and what mechanisms were unique to the mandate of this organization that allowed it to be so successful in a competitive marketplace? Was it just a highly capable individual or team in the right place at the right time, or was there something institutionally correct that we can learn from this example?
Other examples such as the LCBO or Petro Canada (when largely government operated) are not entirely fair comparisons. They are highly profitable companies mostly because the government awards itself a monopoly. The efficiencies of a monopoly can be great, since there are no expensive and duplicit marketing campaigns, and locations can be strategically chosen to maximize profit while offering better average service. However, I should say again that the much of the LCBOs profits must (by economic theory) be due to the fact that they have a monopoly power to set prices. This is the reason that I choose to emphasize the example of the mint, which operates in a competitive market.
_______________________________________
We have seen here that governments fill important gaps that would be poorly served by markets. We have also seen that at least some crown corporations can operate competitively and efficiently.
Let me emphasize that I am well aware that I am making a rather one-sided argument. The other side of the argument is very well established, and is nearly an article of faith among a significant portion of society. However, it has its basis in a simplistic view of fact.
I will readily admit that governments don't tend to be as efficient as markets. The problem of perception comes from the fact that governments are active precisely where efficiency is hardest to achieve.
The facts will tell you that governments are less efficient than markets. What I have argued, is that with a little thought, we can see that much of the cause for this is that governments tackle the most challenging and unprofitable issues. Counter-intuitively, these are absolutely vital to efficient and profitable operations in markets.
This last statement is not an original point, but I think the explanation I offer for why so many people are inclined to disagree with the argument is.
Monday, December 15, 2008
Aligning the present and the future - playing in the stars
I have two comments I’d like target to the growing chorus of people who believe that fundamental change is needed in many of the ways we approach food production, industrial production, and in general, the way that we in the present-day West tend to face life. Just to be clear, I'm totally part of that chorus. How to get it done, however, is a matter of strategy and communication more so than ideals.
The first comment is that change is almost guaranteed not to happen in a timely manner unless it can be framed in such a way as to be appealing to today’s corporate and political elite. The elites typically have an interest in maintaining the status quo, but can sometimes be tempted to change their ways if the benefits of doing so exceed the potential risks of trying to maintain things how they are. For example, corporate investors may be tempted by potential for profits in nascent energy industries or commercial opportunities in entertainment and/or communications. Another way to look at this is that the cost of doing business today’s way would have to be perceived as sufficiently risky to embrace tomorrow. Fortunately, this is inherently compatible with the philosophy of markets. All that remains to be done is to change the rules of the game to make it possible.
The second comment is that a ‘revolution’ of sorts could also be achieved through the court of public opinion. This is far more appealing in a democratic sense, and would ideally be used in conjunction with the first proposition. In fact, this could be an important step in creating the pressure to establish new rules to the game. However, I would like to point out that it is a rare thing indeed that revolutionary change succeeds without the consent or support of at least some significant portion of the political and commercial elite. I am aware of no contradictory examples in history. Ideally, a combination of consumer pressures and democratic pressures, coupled with new market opportunities in a sustainable society, will align the interests of a sufficient portion of the general public and the powerful.
Otherwise, I propose that our move into the future will happen in a haphazard and patchwork manner that is all too likely to degrade our natural capital to the point where technical progress will not be able to overcome scarcity, resulting in either a long economic decline or a crash. Fortunately, we humans have this thing called rationality, and are even capable of using it to consider the potential trajectories that our current actions can take.
___________________________________________
With a decent background in science, I do find it somewhat contradictory to make predictions about future developments. After all, evolution occurs in ‘response’ to (or rather, selection acts according to) environmental pressures, and does not by nature lead in any specific direction.
This poses two problems. The first is that we don’t really know where things would go if everything is left to its own devices (God knows the proponents of laissez-faire sure wouldn’t leave the markets to sort themselves out ... they’d be milking every cow in the field, teats or no). The second is that we don’t really know what ‘evolutionary’ pressures in future social and economic environments will be like, and thus have little ability to predict the effects that current trends, regulations or political outcomes may have on future events.
I was thinking today … as I’ve said before (a sort of upside down version of the concept of ‘survivorship bias’ in evaluation of financial management capabilities), that the best way to be wrong is to start making predictions. Then, I had a brilliant thought! But the best way to make correct predictions is to make lots of them! Anyways…my extensive use of the conditional and bracketed conditionalities may make this difficult to read, but also limit my statements to forms that are nearly self-proving. See the following sentence for an example…
In any case, what I’m saying is sort of self-evident, since it amounts to saying that if unfettered markets will lead to an environmental collapse, AND we do nothing about it, then there will be an environmental collapse. I happen to be very doubtful that markets will manage to align environmental and economic interests on their own, mostly due to the near impossibility of aligning the interests of current and future generations within the scope of a lax regulatory framework and a legal system which obliges CEOs to act in the interests of their shareholders’ maximum short-term profits.
The second of these need not be an inherent problem. Also, it would be unfair to set aside the potential role for technical progress. It will surely play a central role in some manner, but we may even demand more goods under greater efficiency depending on the elasticity of consumer demand. What this essentially points to is the need for political action to create pressures for a regulatory framework that will allow profit maximizing business to operate in a framework that makes some effort to align the interests of present and future generations, while stoking the fires of technical progress and entrepreneurship that will get us there.
______________________________________
This brings us to the classic question of whether there can be such a thing as a priori knowledge, where in a sense, the contradictions in Hume, Kant and Kierkegaard are informative. Hume thinks all knowledge is fundamentally based on experience, which shapes our ability to think. (Interestingly, at a biochemical or molecular level, we can sort of say that his position more or less true, in a sense). Kant, however, claims that all metaphysical knowledge must be a priori, since if it required our experience of the thing for it to be a truth, then it could not be a truth in and of itself (his interest being the development of a logically consistent theory of morality). However, since there isn’t much question that Kierkegaard was correct that the finitude of the human mind can never grasp the complexity of reality (except perhaps the very tiny bits of it we are exposed to), then how could blind ventures into a priori knowledge ever lead to greater spiritual progress than ventures made in the confines of our material existence?
I agree with Kant, but only with the exception that he has charged us to do the impossible, which we must then accomplish. Otherwise, what separates us ‘questioning beings’ from the monkey?
Monkeys are totally cool. But hey … nature only favours species that are able to prevent their collapse, and we may be the first to be able to do so self-consciously, through intelligence or any other means possible. Wouldn’t the truly natural thing be to harness our economy so as to ensure the long term fitness of our species? (In case you think this smacks of the tiniest hint of eugenics, I will use this context as a stepping stone in my next entry to show how the concept of eugenics can be nothing if not fundamentally flawed. My statement here is somewhat far-fetched in that it suggests that we may need to actively make sure that we still have a functioning environment to operate in. Eugenics is infinitely more far-fetched, since it presumes infinitely more knowledge, as I will show, and so it should be pretty easy to knock this nonsense out of the park).
On a somewhat different note, I decided today that humans will colonize the galaxy. It’s really the only choice, since our earth will only last for so long. After all, the sun will probably explode in a few billion years. Then I became sad, thinking that it would be so interesting to see how things turn out. Oh well, that’s life. Then I read an article on the successes and challenges of accommodating Muslims in European cities, and how local political institutions were effectively meeting these challenges.
While faith may sometimes manifest itself as enlightened inquiry (I have none of the first, and perhaps some of the second), I then considered the effects of blind faith, which has been a mobilizing factor for conflict over the ages.
On balance, consideration of such conflict led me to think that humanity’s development is far more likely to follow the experience of the Vikings in Greenland. I would never say that we’d be better off if no one had faith, but faith and enlightened inquiry are a contradiction that few minds will happily embrace.
Given these theoretical and historico-empirical problems, I think I will have to settle for the following … I decided today that, if inter-cultural cooperation and mutual respect develop to the point where the major religions of the world can reconcile themselves to the fact that they are embarking on different, yet similar paths of spiritual develoment, all of which are legitimate and meaningful, then we may one day play in the stars.
The nature of a recent email exchange with a fundamentalist Christian who believes that God appointed Harper, however, leads me to believe that religion will be the primary force that prevents humanity from ever reaching the heavens.
Is this a reflection of experience, an a priori reasoning (where Manichean faith prevents cooperation or reconciliation), or an indication of the sheer impossibility of the individual mind to perceive the infinite complexity of reality? I suppose there is comfort for some people in saying “God knows” (which I consider to be a close equivalent to saying "reality is"), but it isn’t going to get me one iota closer to knowing.
OMG!!! As I wrote a title (the last thing I did), “We’re all made of stars” by Moby just came on. Here’s the chorus… “People they come together, people they fall apart, no one can stop us now, we’re all made of stars.” It was on random from a pretty large playlist. OK, I give us a 1 in 4516 chance. From an evolutionary standpoint, things are looking good!
The first comment is that change is almost guaranteed not to happen in a timely manner unless it can be framed in such a way as to be appealing to today’s corporate and political elite. The elites typically have an interest in maintaining the status quo, but can sometimes be tempted to change their ways if the benefits of doing so exceed the potential risks of trying to maintain things how they are. For example, corporate investors may be tempted by potential for profits in nascent energy industries or commercial opportunities in entertainment and/or communications. Another way to look at this is that the cost of doing business today’s way would have to be perceived as sufficiently risky to embrace tomorrow. Fortunately, this is inherently compatible with the philosophy of markets. All that remains to be done is to change the rules of the game to make it possible.
The second comment is that a ‘revolution’ of sorts could also be achieved through the court of public opinion. This is far more appealing in a democratic sense, and would ideally be used in conjunction with the first proposition. In fact, this could be an important step in creating the pressure to establish new rules to the game. However, I would like to point out that it is a rare thing indeed that revolutionary change succeeds without the consent or support of at least some significant portion of the political and commercial elite. I am aware of no contradictory examples in history. Ideally, a combination of consumer pressures and democratic pressures, coupled with new market opportunities in a sustainable society, will align the interests of a sufficient portion of the general public and the powerful.
Otherwise, I propose that our move into the future will happen in a haphazard and patchwork manner that is all too likely to degrade our natural capital to the point where technical progress will not be able to overcome scarcity, resulting in either a long economic decline or a crash. Fortunately, we humans have this thing called rationality, and are even capable of using it to consider the potential trajectories that our current actions can take.
___________________________________________
With a decent background in science, I do find it somewhat contradictory to make predictions about future developments. After all, evolution occurs in ‘response’ to (or rather, selection acts according to) environmental pressures, and does not by nature lead in any specific direction.
This poses two problems. The first is that we don’t really know where things would go if everything is left to its own devices (God knows the proponents of laissez-faire sure wouldn’t leave the markets to sort themselves out ... they’d be milking every cow in the field, teats or no). The second is that we don’t really know what ‘evolutionary’ pressures in future social and economic environments will be like, and thus have little ability to predict the effects that current trends, regulations or political outcomes may have on future events.
I was thinking today … as I’ve said before (a sort of upside down version of the concept of ‘survivorship bias’ in evaluation of financial management capabilities), that the best way to be wrong is to start making predictions. Then, I had a brilliant thought! But the best way to make correct predictions is to make lots of them! Anyways…my extensive use of the conditional and bracketed conditionalities may make this difficult to read, but also limit my statements to forms that are nearly self-proving. See the following sentence for an example…
In any case, what I’m saying is sort of self-evident, since it amounts to saying that if unfettered markets will lead to an environmental collapse, AND we do nothing about it, then there will be an environmental collapse. I happen to be very doubtful that markets will manage to align environmental and economic interests on their own, mostly due to the near impossibility of aligning the interests of current and future generations within the scope of a lax regulatory framework and a legal system which obliges CEOs to act in the interests of their shareholders’ maximum short-term profits.
The second of these need not be an inherent problem. Also, it would be unfair to set aside the potential role for technical progress. It will surely play a central role in some manner, but we may even demand more goods under greater efficiency depending on the elasticity of consumer demand. What this essentially points to is the need for political action to create pressures for a regulatory framework that will allow profit maximizing business to operate in a framework that makes some effort to align the interests of present and future generations, while stoking the fires of technical progress and entrepreneurship that will get us there.
______________________________________
This brings us to the classic question of whether there can be such a thing as a priori knowledge, where in a sense, the contradictions in Hume, Kant and Kierkegaard are informative. Hume thinks all knowledge is fundamentally based on experience, which shapes our ability to think. (Interestingly, at a biochemical or molecular level, we can sort of say that his position more or less true, in a sense). Kant, however, claims that all metaphysical knowledge must be a priori, since if it required our experience of the thing for it to be a truth, then it could not be a truth in and of itself (his interest being the development of a logically consistent theory of morality). However, since there isn’t much question that Kierkegaard was correct that the finitude of the human mind can never grasp the complexity of reality (except perhaps the very tiny bits of it we are exposed to), then how could blind ventures into a priori knowledge ever lead to greater spiritual progress than ventures made in the confines of our material existence?
I agree with Kant, but only with the exception that he has charged us to do the impossible, which we must then accomplish. Otherwise, what separates us ‘questioning beings’ from the monkey?
Monkeys are totally cool. But hey … nature only favours species that are able to prevent their collapse, and we may be the first to be able to do so self-consciously, through intelligence or any other means possible. Wouldn’t the truly natural thing be to harness our economy so as to ensure the long term fitness of our species? (In case you think this smacks of the tiniest hint of eugenics, I will use this context as a stepping stone in my next entry to show how the concept of eugenics can be nothing if not fundamentally flawed. My statement here is somewhat far-fetched in that it suggests that we may need to actively make sure that we still have a functioning environment to operate in. Eugenics is infinitely more far-fetched, since it presumes infinitely more knowledge, as I will show, and so it should be pretty easy to knock this nonsense out of the park).
On a somewhat different note, I decided today that humans will colonize the galaxy. It’s really the only choice, since our earth will only last for so long. After all, the sun will probably explode in a few billion years. Then I became sad, thinking that it would be so interesting to see how things turn out. Oh well, that’s life. Then I read an article on the successes and challenges of accommodating Muslims in European cities, and how local political institutions were effectively meeting these challenges.
While faith may sometimes manifest itself as enlightened inquiry (I have none of the first, and perhaps some of the second), I then considered the effects of blind faith, which has been a mobilizing factor for conflict over the ages.
On balance, consideration of such conflict led me to think that humanity’s development is far more likely to follow the experience of the Vikings in Greenland. I would never say that we’d be better off if no one had faith, but faith and enlightened inquiry are a contradiction that few minds will happily embrace.
Given these theoretical and historico-empirical problems, I think I will have to settle for the following … I decided today that, if inter-cultural cooperation and mutual respect develop to the point where the major religions of the world can reconcile themselves to the fact that they are embarking on different, yet similar paths of spiritual develoment, all of which are legitimate and meaningful, then we may one day play in the stars.
The nature of a recent email exchange with a fundamentalist Christian who believes that God appointed Harper, however, leads me to believe that religion will be the primary force that prevents humanity from ever reaching the heavens.
Is this a reflection of experience, an a priori reasoning (where Manichean faith prevents cooperation or reconciliation), or an indication of the sheer impossibility of the individual mind to perceive the infinite complexity of reality? I suppose there is comfort for some people in saying “God knows” (which I consider to be a close equivalent to saying "reality is"), but it isn’t going to get me one iota closer to knowing.
OMG!!! As I wrote a title (the last thing I did), “We’re all made of stars” by Moby just came on. Here’s the chorus… “People they come together, people they fall apart, no one can stop us now, we’re all made of stars.” It was on random from a pretty large playlist. OK, I give us a 1 in 4516 chance. From an evolutionary standpoint, things are looking good!
Friday, December 12, 2008
Pomegranitstan - can a fruit succeed where the greatest powers on earth have failed?
There's an idea these days that the pomegranate can save Afghanistan. I first read about it during the summer. Being sceptical, I did some research on it at the time. I recently read another article on it so I feel inclined to actually write something about it.
When I first read about it, I got excited and did a database search on the U of T libraries journal search for just about every combination of words I could think of that could possibly relate to pomegranates.
In fact, I got absolutely nowhere.
Don't think this has something to do with being at some shabby university or something. U of T spends millions a year on subscriptions to thousands of research journals (and believe me, I took advantage of it while I was there), that are all available to students through the library website.
Don't think it's because I didn't know what to look for. My principle interest has to do with relationships between conflict and sustainable farm management in dry areas. Did you know that roots have roots hairs? Well, to my knowledge, I've read every substantial piece of research on root hair development that has been produced in the last 15 years.
Why is that relevant? Root hairs are the primary way that plants can increase its surface to volume ratio in the soil, which is of incredible importance when operating in nutrient poor soils. Aside from nutrient concentration itself, nutrient uptake is generally a factor of how much water is around, the pH of the soil and the texture of the soil. This allows for somewhat refined treatment of the shoot-to-root ratio, which is a variable that is commonly used to explain a number of factors throughout a plant's development.
Of course, there are lots of factors, both scientific and social, that are pertinent to the potential role of the pomegranate. I searched for every combination I could possibly think of, and got nowhere.
Then I went online for the normal searches. I mean, pomegranates have been around for a long time. Perhaps there would be such a basis of common knowledge about the fruit that there was no need for academic research.
Excited, I repeated my searches, then broadened things into more general terms that are more likely to be used by botanical enthusiasts outside of academia.
What did I find? Well, not much at all, but of particular note is that pomegranates need a LOT of water.
This leads to a few major points.
1) It appears that there is no expert knowledge on the pomegranate, yet it is being promoted as a saviour to Afghanistan's developmental problems. We are telling farmers to plant the trees and we don't know a damn thing about the plant. An orchard is a very long-term investment, which generally means waiting 3 to 5 years until the tree becomes productive. The required returns to make an investment worthwhile in such a risk-prone environment can easily be discounted to the point where most sensible farmers are going to tell the development 'experts' to take a hike. Never mind the fact that, to my knowledge, there is no tradition of operating orchards in recent generations in Afghanistan. We don't know what we're talking about and neither do they. Not a good place to start an industry.
2) The bloody country is practically a desert. OK, that's not quite true. Between Afghanistan and desert lie arid and semi-arid, whereas I think that many parts of Afghanistan fall somewhat closer to sub-humid, but dude, the place is dry! No problem, they say, we're building a dam, so there will be lots of extra water. Right … OK, as though we couldn't find a better use for that water than to grow one of the most water intensive plants around.
3) Anyone interested in stumping up a billion dollars worth of fertilizers? I mean, poppies grow like weeds there, but pomegranates ... well that's going to take some serious inputs. Do we seriously think that these farmers will keep up with the pomegranates after we stop giving them free fertilizers?
OK, so I'll be honest. I typically hate it when people dig into an idea and have nothing better to offer. I don't know how to get the farmers out of the opium markets. I don't know how to get the farmers into formal markets where they can leverage their orchards as capital tools for other investments.
But hey, what a great time for a science experiment! Since we don't know what we're talking about either, I suggest two approaches to moving forward with this whole pomegranate thing. Let me be clear that these both come from the perspective that, to my knowledge, the pomegranate is grossly unsuited to being the backbone of growth in Afghanistan simply because the tree is not suited to the dry climate and poor soil.
The first idea is to allocate a million dollars a year for the next 5 years to funding grants for universities in departments of ecology, evolutionary biology, soil sciences, botany, agriculture, etc. Spread it over a dozen or so separate programs so as to end up with a variety of methodologies and results that can be compared under different strategies. The upside is that we will have a better idea of the fine technical details of how well-suited the pomegranate is to the climate and soil conditions in Afghanistan. The downside is that we'd have to wait five years to tell the Afghans what to do (whereas I prefer the idea of providing technical information and support for a variety of options that farmers might want to consider), by which point in time we may have even less ability to influence Afghan farmers' production decisions.
The second idea is to get the Afghan farmers to do the science experiment themselves. Simply put, limited support for the pomegranates could be provided with a firm condition that certain amounts of data needed to be collected rigorously from the orchard. No white elephants indeed. A handful of variables would be enough, and could be easily crunched by your average desktop computer after the data was input. Meanwhile, a certain number of random root, leaf and fruit samples could be sent along with details of fertilizer treatments and soil samples, to a nascent department of agronomy at the soon to be growing University of Kabul.
This kills a whole flock of birds in one barrage. First, farmers are off opium production, which cuts into resources for militants. Second, firm commitments to a lump sum of cash in exchange for samples and some very simple data may be sufficient to overcome the effect that risk aversion would have on long term crops involved in orchards. Third, it creates the seeds of some domestic growth of agricultural expertise, research and technical knowledge. Fourth, in specific terms, a gap in knowledge is filled as research on pomegranates is carried out. Fifth, an orchard is a tangible asset that can be leveraged for further economic investments. Sixth, the project as I described it directly draws attention to the relation between crop choice, farm management and the effects that these may have on soil fertility in the long term.
The potential downside? With poor soil and dry climate, we have the perfect ingredients for rapid soil degradation, so control measures must be built into any projects that seek to encourage Afghan farmers to adopt crops that are not presently cultivated in any significant quantity.
Will it get farmers out of opium markets?
I have no idea. It might fail miserably with a finding that pomegranates are a terrible choice for Afghanistan. BUT, either way, the second idea should make for good public relations with the people and might bring numerous spinoff benefits, as described above. Way better than just handing out seeds and saying hey, try this.
I’m still a sceptic on the pomegranate. I think the ideal crop will be one that is chosen with consideration to its climatic compatibility and/or its ability to generate and improve inherent soil productivity (such as in intercropping or where orchard crops are chosen among species which fix nitrogen in their leaves, and thus provide free fertilizer from the leaves). Furthermore, the science and economics of it don't matter one bit if the farmers decide that they're not interested in growing the plant that the 'experts' recommend. Still, if some of those development wizards down at the FAO are intent on pomegranates, let’s do it in a way that creates opportunities even if the project doesn't pan out.
When I first read about it, I got excited and did a database search on the U of T libraries journal search for just about every combination of words I could think of that could possibly relate to pomegranates.
In fact, I got absolutely nowhere.
Don't think this has something to do with being at some shabby university or something. U of T spends millions a year on subscriptions to thousands of research journals (and believe me, I took advantage of it while I was there), that are all available to students through the library website.
Don't think it's because I didn't know what to look for. My principle interest has to do with relationships between conflict and sustainable farm management in dry areas. Did you know that roots have roots hairs? Well, to my knowledge, I've read every substantial piece of research on root hair development that has been produced in the last 15 years.
Why is that relevant? Root hairs are the primary way that plants can increase its surface to volume ratio in the soil, which is of incredible importance when operating in nutrient poor soils. Aside from nutrient concentration itself, nutrient uptake is generally a factor of how much water is around, the pH of the soil and the texture of the soil. This allows for somewhat refined treatment of the shoot-to-root ratio, which is a variable that is commonly used to explain a number of factors throughout a plant's development.
Of course, there are lots of factors, both scientific and social, that are pertinent to the potential role of the pomegranate. I searched for every combination I could possibly think of, and got nowhere.
Then I went online for the normal searches. I mean, pomegranates have been around for a long time. Perhaps there would be such a basis of common knowledge about the fruit that there was no need for academic research.
Excited, I repeated my searches, then broadened things into more general terms that are more likely to be used by botanical enthusiasts outside of academia.
What did I find? Well, not much at all, but of particular note is that pomegranates need a LOT of water.
This leads to a few major points.
1) It appears that there is no expert knowledge on the pomegranate, yet it is being promoted as a saviour to Afghanistan's developmental problems. We are telling farmers to plant the trees and we don't know a damn thing about the plant. An orchard is a very long-term investment, which generally means waiting 3 to 5 years until the tree becomes productive. The required returns to make an investment worthwhile in such a risk-prone environment can easily be discounted to the point where most sensible farmers are going to tell the development 'experts' to take a hike. Never mind the fact that, to my knowledge, there is no tradition of operating orchards in recent generations in Afghanistan. We don't know what we're talking about and neither do they. Not a good place to start an industry.
2) The bloody country is practically a desert. OK, that's not quite true. Between Afghanistan and desert lie arid and semi-arid, whereas I think that many parts of Afghanistan fall somewhat closer to sub-humid, but dude, the place is dry! No problem, they say, we're building a dam, so there will be lots of extra water. Right … OK, as though we couldn't find a better use for that water than to grow one of the most water intensive plants around.
3) Anyone interested in stumping up a billion dollars worth of fertilizers? I mean, poppies grow like weeds there, but pomegranates ... well that's going to take some serious inputs. Do we seriously think that these farmers will keep up with the pomegranates after we stop giving them free fertilizers?
OK, so I'll be honest. I typically hate it when people dig into an idea and have nothing better to offer. I don't know how to get the farmers out of the opium markets. I don't know how to get the farmers into formal markets where they can leverage their orchards as capital tools for other investments.
But hey, what a great time for a science experiment! Since we don't know what we're talking about either, I suggest two approaches to moving forward with this whole pomegranate thing. Let me be clear that these both come from the perspective that, to my knowledge, the pomegranate is grossly unsuited to being the backbone of growth in Afghanistan simply because the tree is not suited to the dry climate and poor soil.
The first idea is to allocate a million dollars a year for the next 5 years to funding grants for universities in departments of ecology, evolutionary biology, soil sciences, botany, agriculture, etc. Spread it over a dozen or so separate programs so as to end up with a variety of methodologies and results that can be compared under different strategies. The upside is that we will have a better idea of the fine technical details of how well-suited the pomegranate is to the climate and soil conditions in Afghanistan. The downside is that we'd have to wait five years to tell the Afghans what to do (whereas I prefer the idea of providing technical information and support for a variety of options that farmers might want to consider), by which point in time we may have even less ability to influence Afghan farmers' production decisions.
The second idea is to get the Afghan farmers to do the science experiment themselves. Simply put, limited support for the pomegranates could be provided with a firm condition that certain amounts of data needed to be collected rigorously from the orchard. No white elephants indeed. A handful of variables would be enough, and could be easily crunched by your average desktop computer after the data was input. Meanwhile, a certain number of random root, leaf and fruit samples could be sent along with details of fertilizer treatments and soil samples, to a nascent department of agronomy at the soon to be growing University of Kabul.
This kills a whole flock of birds in one barrage. First, farmers are off opium production, which cuts into resources for militants. Second, firm commitments to a lump sum of cash in exchange for samples and some very simple data may be sufficient to overcome the effect that risk aversion would have on long term crops involved in orchards. Third, it creates the seeds of some domestic growth of agricultural expertise, research and technical knowledge. Fourth, in specific terms, a gap in knowledge is filled as research on pomegranates is carried out. Fifth, an orchard is a tangible asset that can be leveraged for further economic investments. Sixth, the project as I described it directly draws attention to the relation between crop choice, farm management and the effects that these may have on soil fertility in the long term.
The potential downside? With poor soil and dry climate, we have the perfect ingredients for rapid soil degradation, so control measures must be built into any projects that seek to encourage Afghan farmers to adopt crops that are not presently cultivated in any significant quantity.
Will it get farmers out of opium markets?
I have no idea. It might fail miserably with a finding that pomegranates are a terrible choice for Afghanistan. BUT, either way, the second idea should make for good public relations with the people and might bring numerous spinoff benefits, as described above. Way better than just handing out seeds and saying hey, try this.
I’m still a sceptic on the pomegranate. I think the ideal crop will be one that is chosen with consideration to its climatic compatibility and/or its ability to generate and improve inherent soil productivity (such as in intercropping or where orchard crops are chosen among species which fix nitrogen in their leaves, and thus provide free fertilizer from the leaves). Furthermore, the science and economics of it don't matter one bit if the farmers decide that they're not interested in growing the plant that the 'experts' recommend. Still, if some of those development wizards down at the FAO are intent on pomegranates, let’s do it in a way that creates opportunities even if the project doesn't pan out.
Tuesday, December 9, 2008
Yep
Nature
Constantly changing
Predictably unpredictable.
Natural laws
Apparently randomly
Acting on all that is.
Man creates
Apparently with purpose.
Yet fateless
Except by chance
Whose dice he loads
Not knowing the game.
Constantly changing
Predictably unpredictable.
Natural laws
Apparently randomly
Acting on all that is.
Man creates
Apparently with purpose.
Yet fateless
Except by chance
Whose dice he loads
Not knowing the game.
Sunday, December 7, 2008
Government and corporations – where lies the greatest waste?
There are a few standard articles of faith, largely following a requisite indoctrination in economic theory, that seem to have percolated down to at least a third of society. Governments are inherently wasteful, whereas markets are inherently efficient. Governments inherently make wrong decisions, whereas markets are inherently wise. Governments are inherently corrupt and self-serving, whereas companies … well, you get the idea.
Some people know this to be totally bogus, pointing to the fact that companies are often corrupt, corporate leaders all too often splash shareholder money about like it grows on trees, and make wrong decisions.
I’m not trying to say that governments are inherently efficient (they’re not), or inherently wise (they sometimes exhibit wisdom, but clearly fail this test more often than we’d like), or that public officials are inherently selfless (while some are, I suppose most just want a job).
Then again, incompetent and wasteful companies are put to the test of markets, and either shape up or ship out. Success or failure in the market is presumed to lead to the best allocation of economic resources. On the other side, so goes the argument, is that government projects don’t face market pressures and are therefore guaranteed to be less efficient. (It may be true some of the time, or perhaps even most of the time, but I simply refuse to take it as an article of faith. The market is certainly less efficient in some cases too.)
I don’t really want to take on the general argument of market efficiency, although it is incredibly simplistic, ignores the fact that too many companies live for short term gain, and pays insufficient attention to the fact that the government provides many services that would be underprovided if left to the market.
_____________________________
I have two main questions.
The first stems from a number of conversations with people who work in corporate environments and complained incessantly about the amount of incompetence, laziness and waste, in a corporate environment.
Given that corporations are also inherently wasteful, can it be taken as an article of faith that governments are EVEN MORE wasteful and suffer from EVEN GREATER difficulties in retaining talented and motivated workers? I.e. – Is it possible that governments might sometimes be more effective at some things, or that some talented individuals in the public service will end up competently directing some programs?
The second question stems from the idea that markets (and therefore company CEOs) make better and more competent decisions than governments.
If good business planning is they keystone of a successful business, then how on earth could a complete lack of public planning be the keystone of a successful society? Shouldn’t we expect both governments and companies to engage in short-term and long-term planning?
______________________________
Don’t get me wrong here. This is not an attack on markets. I’m completely comfortable with simultaneously holding both sides of a contradiction. (This is something I learned from Hegel, and it has served me well in accepting the legitimacy of competing views relating to complex issues.) A free-marketist environmentalist who believes that public planning is needed to ensure that private enterprises can efficiently create jobs with the goal of maximizing private profits in a sustainable society simply finds it hard to understand how otherwise intelligent people often argue that companies are inherently less wasteful than governments.
Why is this a terribly important issue? Because the concept of deadweight loss in microeconomic theory comes across as showing that governments destroy economic capacity and reduce a society’s well-being any time it levies taxes. It is a visual tool that is communicated easily, and seeing how readily 50 or so classmates swallowed the whole bit last summer without questioning where the tax money went is one of the reasons that the study of economic theory can all too easily feel like brainwashing.
Many people see through this. Others repeat the mantra of “cut taxes, cut taxes” any time they are faced with a question about economic policy. Markets pressures are great, but to presume that agents carrying out decisions based on collective public wisdom as expressed through democratic institutions will always make worse decisions than individual market actors is a contradiction that is untenable as general truth, in my mind.
All the same, keep the public corporations very far away from politicians. I have suggested that good managers can be found at crown corporations and in public projects. This does not mean that political elites will never abuse their position for personal gain or for nepotistic appointments. Similarly, it would be ridiculous to say that corporate elites would never abuse their position for personal gain or make nepotistic appointments. Which is greater? Well, my argument is simply that it is a matter of debate, not an article of faith, for any given project.
Some people know this to be totally bogus, pointing to the fact that companies are often corrupt, corporate leaders all too often splash shareholder money about like it grows on trees, and make wrong decisions.
I’m not trying to say that governments are inherently efficient (they’re not), or inherently wise (they sometimes exhibit wisdom, but clearly fail this test more often than we’d like), or that public officials are inherently selfless (while some are, I suppose most just want a job).
Then again, incompetent and wasteful companies are put to the test of markets, and either shape up or ship out. Success or failure in the market is presumed to lead to the best allocation of economic resources. On the other side, so goes the argument, is that government projects don’t face market pressures and are therefore guaranteed to be less efficient. (It may be true some of the time, or perhaps even most of the time, but I simply refuse to take it as an article of faith. The market is certainly less efficient in some cases too.)
I don’t really want to take on the general argument of market efficiency, although it is incredibly simplistic, ignores the fact that too many companies live for short term gain, and pays insufficient attention to the fact that the government provides many services that would be underprovided if left to the market.
_____________________________
I have two main questions.
The first stems from a number of conversations with people who work in corporate environments and complained incessantly about the amount of incompetence, laziness and waste, in a corporate environment.
Given that corporations are also inherently wasteful, can it be taken as an article of faith that governments are EVEN MORE wasteful and suffer from EVEN GREATER difficulties in retaining talented and motivated workers? I.e. – Is it possible that governments might sometimes be more effective at some things, or that some talented individuals in the public service will end up competently directing some programs?
The second question stems from the idea that markets (and therefore company CEOs) make better and more competent decisions than governments.
If good business planning is they keystone of a successful business, then how on earth could a complete lack of public planning be the keystone of a successful society? Shouldn’t we expect both governments and companies to engage in short-term and long-term planning?
______________________________
Don’t get me wrong here. This is not an attack on markets. I’m completely comfortable with simultaneously holding both sides of a contradiction. (This is something I learned from Hegel, and it has served me well in accepting the legitimacy of competing views relating to complex issues.) A free-marketist environmentalist who believes that public planning is needed to ensure that private enterprises can efficiently create jobs with the goal of maximizing private profits in a sustainable society simply finds it hard to understand how otherwise intelligent people often argue that companies are inherently less wasteful than governments.
Why is this a terribly important issue? Because the concept of deadweight loss in microeconomic theory comes across as showing that governments destroy economic capacity and reduce a society’s well-being any time it levies taxes. It is a visual tool that is communicated easily, and seeing how readily 50 or so classmates swallowed the whole bit last summer without questioning where the tax money went is one of the reasons that the study of economic theory can all too easily feel like brainwashing.
Many people see through this. Others repeat the mantra of “cut taxes, cut taxes” any time they are faced with a question about economic policy. Markets pressures are great, but to presume that agents carrying out decisions based on collective public wisdom as expressed through democratic institutions will always make worse decisions than individual market actors is a contradiction that is untenable as general truth, in my mind.
All the same, keep the public corporations very far away from politicians. I have suggested that good managers can be found at crown corporations and in public projects. This does not mean that political elites will never abuse their position for personal gain or for nepotistic appointments. Similarly, it would be ridiculous to say that corporate elites would never abuse their position for personal gain or make nepotistic appointments. Which is greater? Well, my argument is simply that it is a matter of debate, not an article of faith, for any given project.
Saturday, December 6, 2008
Why buying local is not always best for the environment.
After some random comments ... I`m going to explain why buying local isn't always the best thing for the environment, including a very minor theoretical modification of a very standard economic argument to show that international trade over long distances can even be good for the environment. Then I'm going to briefly explain why I’m wrong, and then I'm going to turn back around and say why I`m right anyways.
Y'know, I sometimes get offended when people talk about how environmentalists have a lot of stupid ideas. Really and truly, environmentalists have a lot of brilliant ideas. Nonetheless, it is still necessary to run through a whole whack of brilliant ideas before you come across one that appeals to people.
This can be accomplished by spending enormous amounts of time, energy and money trying to change people`s mind, or by finding brilliant ideas that are compatible with, or appealing to, the present social milieu. Hernando de Soto argues that property laws enforced from above generally fail, whereas those that reflect to some degree, an existing informal modus operandi, have a chance to effectively bring diverse property systems under a general framework.
While environmentalists are one hundred percent correct to point to overwhelming scientific evidence of numerous environmental problems, we cannot force people to think like us. Revolutionary change in social values and economic practices is absolutely needed. However, environmental solutions must be geared towards allowing human ingenuity to make breakthroughs starting from here and now, the present social reality.
Unfortunately, the critics are also sometimes right that some environmentalist spend too much effort promoting things that are simply bad ideas (the most famous being ethanol). Among so many brilliant ideas there are sure to be a few of questionable value. A brilliant idea that appeals to tree huggers all too often fails to account for the social, economic and political reality that surrounds them. Those who only move in green circles then become deluded into thinking that their arguments may be appealing to the general public.
____________________________________________________
One such argument is the `buy local` movement among greens. In principle, I think it's a great idea. Fantastic. There are only two major, MAJOR problems that this movement has to face. First, there are some international products that I am simply not willing to give up (and I'd estimate that my lifestyle choices put me in about the greenest one or two percent of Canadians), and more importantly, it completely ignores the principle of comparative advantage.
The first problem I mention is a more social one. Humans like variety. It`s a simple fact. Have you ever eaten cabbage soup and potatoes for an entire winter? Well, me neither. But I ate rice and lentils for nearly a month while hiking through the Himalayas. I was so hungry every time I didn't care, but WOW was it nice to have ANYTHING ELSE after just a month. The people of the mountain villages, of course, had never had much variety and so didn't mind it.
I know what variety is, and I like it. You`re never, ever, ever, going to convince me that I should stop eating bananas or oranges, or that peanuts are hereby off limit. Simply not going to happen. I mean, I know that local produce is often inherently better when in season. The problem is that it's not in season for long, and I might want it at some other time of the year.
I want a shirt made in Bangladesh, a bike made in China, computer components made in Malaysia, recording equipment made in Singapore, shelves made in Sweden, pickles made in Poland, shoes made in Thailand, etc, etc, etc … And I feel great about it. People there deserve jobs too. To which, a die-hard green might say … “You’re not really green. You can’t be, with a list like that.”
In any case, some will tell me that the increasing cost of transportation in the long run will mean that I won’t have these choices, and I should start acting ethically now. (I should point out that the recent collapse of the price of oil couldn’t possibly last more than a year or two, unless we really and truly are heading into a global depression that lasts for years.)
This is the first problem. 'Buy local' campaigns are not going to get far unless there is a pressing, immediate impact on the pocketbook. People like variety and people like to buy what’s cheap.
________________________________
Up until now, it simply sounds like I just don’t give two hoots. Wait until I argue that buying local could even be bad for the environment! Anyone who’s ever heard of comparative advantage can probably skip the rest of this and figure it out on their own, if they haven’t already.
The principal of comparative advantage says that people can always gain from trade. I’m going to restate the theory of comparative advantage as follows – not counting for transportation, two groups can always reduce their environmental impact by trading. The limits are obvious, since transportation is the ONLY consideration that is made by the ‘buy local’ argument, but I’m going to flesh this out anyways.
OK, imagine this. Two regions and two villages that are very far apart. The citizens of each village are unwilling to move to a more productive region (for the sake of simplicity). People in each village eat bread and cheese. Let’s say that this only requires wheat and dairy cows. Village one produces 2 loaves of bread per person per acre or 1 block of cheese per person per acre with 0.5 bags of inorganic fertilizers per acre. Village two produces 1 loaf of bread per acre and 0.75 blocks of cheese per acre, but the soil is poor and so these each require 1 bag of fertilizer per acre. However, transportation between the two villages costs the equivalent energy of producing 5 bags of fertilizer for each 100 loaves or blocks of cheese. Finally, the families in each village insist on consuming a fixed quantity of bread and cheese regardless of how much land they have to bring into cultivation.
Let’s say that village one trades 180 loaves of bread for 100 blocks of cheese from village 2. Village 1 gains because they would only get 90 blocks of cheese if they gave up production of 180 loaves of bread and thus gained 10 blocks of cheese, while village 2 gains because they could only produce 133 loaves of bread if they gave up production of 100 blocks of cheese and thus gained 47 loaves of bread.
In principle that’s no different whatsoever from the theory of comparative advantage. The significant thing to add, is to say that village 1 can take 10 acres out of production due to their gain of 10 blocks of cheese, while village 2 can take 47 acres of production due to their gains of 47 loaves of bread. The energy equivalent of 14 bags of fertilizer was used in transportation, but 52 bags of fertilizer were saved by trading (half a bag per acre in village 1 and a bag per acre in village 2). Of course, I’m just making up the numbers. If energy were sufficiently expensive, it is absolutely true that we reach a point where transaction costs, including transportation, become too energetically expensive and exceed the benefits of trade under comparative advantage.
Two more important points here – comparative advantage benefits both trade partners even if one trade partner is more efficient at producing both goods, and also, that this logic can be applied directly towards energy savings.
The main difference with my interpretation is that it’s normally assumed that the efficiency gains would simply be exploited to produce more, rather than to consume fewer resources.
Optimizing this situation to include final prices with flexible consumption habits and so on is a matter of some relatively simply calculus with a few more pieces of information such as ‘utility functions’, but let’s just rest on this – the point is made that trade CAN save energy, and CAN therefore be good for the environment.
_____________________________________
The major hole in my argument can be spotted quite easily. Village one should eat relatively more bread, while village two should eat relatively more cheese (even if they still trade just a bit), which would be better for the environment because you save the transportation costs.
It’s ridiculous in the example, but a more realistic example would be the hundred mile diet. Eat what’s grown locally and save the transportation costs.
That’s why my argument is wrong. People can look out for the environment by consuming locally, as long as they are only interested in consuming goods that the region has a comparative advantage in.
____________________________________
Unfortunately, Nova Scotians like beef, Albertans like fish and Quebecois like bread. This is not going to change. The idea of the hundred mile diet sounds really cool to me. Awesome. Sure. But it’s never, ever going to fly with 90% of people at this very moment.
As for making beef in Nova Scotia, growing wheat in Quebec, or fishing in Alberta … we might just all be doing the environment a favour to produce what our surroundings are most suited to, then engaging in trade.
As Saul Williams said – “There is nothing more powerful than an idea whose time has come.”
The other side of that is, while preparing the ground for future moves is important, an idea whose time has come will be one that fits with the social, political and economic reality of the day. That certainly does not preclude revolutionary change, but it typically does.
A standard analytical tool in economics is ‘marginal’ decision making. This means considering things one unit at a time. People may find the idea of a 100-mile-diet luxurious for a Sunday dinner. However, the theory of comparative advantage manifests itself too strongly in economic reality, and so it simply gets too expensive (or has too little variety) to practice on a daily basis.
Environmental action is most immediate at the local level, but I suggest that discussion of trade and the environment will never gain favour among a significant portion of society if it doesn’t a) commit to framing the issue in a manner that is appealing to a significant cross-section of the status-quo (which is an ever-changing target) and b) recognize that comparative advantage means that international trade CAN be good for the environment.
Call this my opposition to green opposition to international trade. Trade can be good for the economy AND for the environment. I haven’t even cracked into the topic of exchange of environmental technologies yet, which was one of the last picks to be eliminated when narrowing down my research interests (feedback cycles between conflict and soil degradation). International trade of goods and trade in environmental technologies are absolutely inseparable issues, since negotiators do, and should, consider the full picture of national interest, in both absolute and relative terms, when negotiating international agreements that seek to improve outcomes at both the national and global level.
Finally, it seems particularly relevant to share what I think is the most important thing that I learned from the most recent winner of the Nobel Prize in economics. Just because trade is always better than no trade, does not mean that even freer trade is always better than the status quo.
In the present context, the obvious limitation is that, while trade CAN always improve environmental and economic outcomes, it does not mean that MORE trade will ALWAYS improve environmental or economic outcomes. Still, the point has clearly been made that there is room for environmental and economic outcomes to be simultaneously improved through international trade.
Y'know, I sometimes get offended when people talk about how environmentalists have a lot of stupid ideas. Really and truly, environmentalists have a lot of brilliant ideas. Nonetheless, it is still necessary to run through a whole whack of brilliant ideas before you come across one that appeals to people.
This can be accomplished by spending enormous amounts of time, energy and money trying to change people`s mind, or by finding brilliant ideas that are compatible with, or appealing to, the present social milieu. Hernando de Soto argues that property laws enforced from above generally fail, whereas those that reflect to some degree, an existing informal modus operandi, have a chance to effectively bring diverse property systems under a general framework.
While environmentalists are one hundred percent correct to point to overwhelming scientific evidence of numerous environmental problems, we cannot force people to think like us. Revolutionary change in social values and economic practices is absolutely needed. However, environmental solutions must be geared towards allowing human ingenuity to make breakthroughs starting from here and now, the present social reality.
Unfortunately, the critics are also sometimes right that some environmentalist spend too much effort promoting things that are simply bad ideas (the most famous being ethanol). Among so many brilliant ideas there are sure to be a few of questionable value. A brilliant idea that appeals to tree huggers all too often fails to account for the social, economic and political reality that surrounds them. Those who only move in green circles then become deluded into thinking that their arguments may be appealing to the general public.
____________________________________________________
One such argument is the `buy local` movement among greens. In principle, I think it's a great idea. Fantastic. There are only two major, MAJOR problems that this movement has to face. First, there are some international products that I am simply not willing to give up (and I'd estimate that my lifestyle choices put me in about the greenest one or two percent of Canadians), and more importantly, it completely ignores the principle of comparative advantage.
The first problem I mention is a more social one. Humans like variety. It`s a simple fact. Have you ever eaten cabbage soup and potatoes for an entire winter? Well, me neither. But I ate rice and lentils for nearly a month while hiking through the Himalayas. I was so hungry every time I didn't care, but WOW was it nice to have ANYTHING ELSE after just a month. The people of the mountain villages, of course, had never had much variety and so didn't mind it.
I know what variety is, and I like it. You`re never, ever, ever, going to convince me that I should stop eating bananas or oranges, or that peanuts are hereby off limit. Simply not going to happen. I mean, I know that local produce is often inherently better when in season. The problem is that it's not in season for long, and I might want it at some other time of the year.
I want a shirt made in Bangladesh, a bike made in China, computer components made in Malaysia, recording equipment made in Singapore, shelves made in Sweden, pickles made in Poland, shoes made in Thailand, etc, etc, etc … And I feel great about it. People there deserve jobs too. To which, a die-hard green might say … “You’re not really green. You can’t be, with a list like that.”
In any case, some will tell me that the increasing cost of transportation in the long run will mean that I won’t have these choices, and I should start acting ethically now. (I should point out that the recent collapse of the price of oil couldn’t possibly last more than a year or two, unless we really and truly are heading into a global depression that lasts for years.)
This is the first problem. 'Buy local' campaigns are not going to get far unless there is a pressing, immediate impact on the pocketbook. People like variety and people like to buy what’s cheap.
________________________________
Up until now, it simply sounds like I just don’t give two hoots. Wait until I argue that buying local could even be bad for the environment! Anyone who’s ever heard of comparative advantage can probably skip the rest of this and figure it out on their own, if they haven’t already.
The principal of comparative advantage says that people can always gain from trade. I’m going to restate the theory of comparative advantage as follows – not counting for transportation, two groups can always reduce their environmental impact by trading. The limits are obvious, since transportation is the ONLY consideration that is made by the ‘buy local’ argument, but I’m going to flesh this out anyways.
OK, imagine this. Two regions and two villages that are very far apart. The citizens of each village are unwilling to move to a more productive region (for the sake of simplicity). People in each village eat bread and cheese. Let’s say that this only requires wheat and dairy cows. Village one produces 2 loaves of bread per person per acre or 1 block of cheese per person per acre with 0.5 bags of inorganic fertilizers per acre. Village two produces 1 loaf of bread per acre and 0.75 blocks of cheese per acre, but the soil is poor and so these each require 1 bag of fertilizer per acre. However, transportation between the two villages costs the equivalent energy of producing 5 bags of fertilizer for each 100 loaves or blocks of cheese. Finally, the families in each village insist on consuming a fixed quantity of bread and cheese regardless of how much land they have to bring into cultivation.
Let’s say that village one trades 180 loaves of bread for 100 blocks of cheese from village 2. Village 1 gains because they would only get 90 blocks of cheese if they gave up production of 180 loaves of bread and thus gained 10 blocks of cheese, while village 2 gains because they could only produce 133 loaves of bread if they gave up production of 100 blocks of cheese and thus gained 47 loaves of bread.
In principle that’s no different whatsoever from the theory of comparative advantage. The significant thing to add, is to say that village 1 can take 10 acres out of production due to their gain of 10 blocks of cheese, while village 2 can take 47 acres of production due to their gains of 47 loaves of bread. The energy equivalent of 14 bags of fertilizer was used in transportation, but 52 bags of fertilizer were saved by trading (half a bag per acre in village 1 and a bag per acre in village 2). Of course, I’m just making up the numbers. If energy were sufficiently expensive, it is absolutely true that we reach a point where transaction costs, including transportation, become too energetically expensive and exceed the benefits of trade under comparative advantage.
Two more important points here – comparative advantage benefits both trade partners even if one trade partner is more efficient at producing both goods, and also, that this logic can be applied directly towards energy savings.
The main difference with my interpretation is that it’s normally assumed that the efficiency gains would simply be exploited to produce more, rather than to consume fewer resources.
Optimizing this situation to include final prices with flexible consumption habits and so on is a matter of some relatively simply calculus with a few more pieces of information such as ‘utility functions’, but let’s just rest on this – the point is made that trade CAN save energy, and CAN therefore be good for the environment.
_____________________________________
The major hole in my argument can be spotted quite easily. Village one should eat relatively more bread, while village two should eat relatively more cheese (even if they still trade just a bit), which would be better for the environment because you save the transportation costs.
It’s ridiculous in the example, but a more realistic example would be the hundred mile diet. Eat what’s grown locally and save the transportation costs.
That’s why my argument is wrong. People can look out for the environment by consuming locally, as long as they are only interested in consuming goods that the region has a comparative advantage in.
____________________________________
Unfortunately, Nova Scotians like beef, Albertans like fish and Quebecois like bread. This is not going to change. The idea of the hundred mile diet sounds really cool to me. Awesome. Sure. But it’s never, ever going to fly with 90% of people at this very moment.
As for making beef in Nova Scotia, growing wheat in Quebec, or fishing in Alberta … we might just all be doing the environment a favour to produce what our surroundings are most suited to, then engaging in trade.
As Saul Williams said – “There is nothing more powerful than an idea whose time has come.”
The other side of that is, while preparing the ground for future moves is important, an idea whose time has come will be one that fits with the social, political and economic reality of the day. That certainly does not preclude revolutionary change, but it typically does.
A standard analytical tool in economics is ‘marginal’ decision making. This means considering things one unit at a time. People may find the idea of a 100-mile-diet luxurious for a Sunday dinner. However, the theory of comparative advantage manifests itself too strongly in economic reality, and so it simply gets too expensive (or has too little variety) to practice on a daily basis.
Environmental action is most immediate at the local level, but I suggest that discussion of trade and the environment will never gain favour among a significant portion of society if it doesn’t a) commit to framing the issue in a manner that is appealing to a significant cross-section of the status-quo (which is an ever-changing target) and b) recognize that comparative advantage means that international trade CAN be good for the environment.
Call this my opposition to green opposition to international trade. Trade can be good for the economy AND for the environment. I haven’t even cracked into the topic of exchange of environmental technologies yet, which was one of the last picks to be eliminated when narrowing down my research interests (feedback cycles between conflict and soil degradation). International trade of goods and trade in environmental technologies are absolutely inseparable issues, since negotiators do, and should, consider the full picture of national interest, in both absolute and relative terms, when negotiating international agreements that seek to improve outcomes at both the national and global level.
Finally, it seems particularly relevant to share what I think is the most important thing that I learned from the most recent winner of the Nobel Prize in economics. Just because trade is always better than no trade, does not mean that even freer trade is always better than the status quo.
In the present context, the obvious limitation is that, while trade CAN always improve environmental and economic outcomes, it does not mean that MORE trade will ALWAYS improve environmental or economic outcomes. Still, the point has clearly been made that there is room for environmental and economic outcomes to be simultaneously improved through international trade.
Friday, December 5, 2008
What next?
Faced with a choice between a prime minister who would use an economic crises as an excuse to break the opposition's knees, and a coalition who wants to overcome the crisis with spending on economic sectors whose economic relevance is in decline (the auto and forestry sectors), I have to say that I really don't like the options at all.
It would be nice if Harper would come back in January, form a coalition of his own, put a couple of the most competent NDP and Liberal representatives in cabinet, and work closely with them to make sure that any stimulus is designed to grow our future potential through investment in people (i.e. education) or targets industries with growth potential. It's sure not what I expect though.
Harper has shown that he is never to be trusted again, since he either a) puts party ahead of country, or b) really thinks that Canada would be better if there was no opposition. However, with pragmatic solutions on the table, I might be willing to pretend for a while.
There is simply no way that I can support an opposition whose claimed raison d'être is to support the auto and forestry sectors. Supporting auto and forestry WORKERS as they shift into industries with a future is one thing. Helping them make more of a product that plain and simply isn't selling isn't going to fix the mess. i.e. - it would be better to pay them to stay home than to make more cars. Making more cars is ultimately deflationary right now, which is undesirable in the present economic climate. Same goes for forestry.
All plans on the table seek to solve new problems in a new era using old-fashioned solutions that are not appropriate to the present need to stimulate economic development in Canada in a manner that targets sustainability while promoting improved productivity in the long run.
__________________________________
Canada is a thriving multiparty democracy that needs to limit the suffering associated with job losses in the present economy with a strategic eye to creating the conditions that favour entrepreneurship in a sustainable economy.
If any portion of the preceding statement is considered debatable by a significant portion of Canadians, then my understatement of the week is that we could do much better.
__________________________________
I can't f'in BELIEVE we now have a precedent that allows the PM to shut parliament when he doesn't have the support of the majority of elected representatives!!
It would be nice if Harper would come back in January, form a coalition of his own, put a couple of the most competent NDP and Liberal representatives in cabinet, and work closely with them to make sure that any stimulus is designed to grow our future potential through investment in people (i.e. education) or targets industries with growth potential. It's sure not what I expect though.
Harper has shown that he is never to be trusted again, since he either a) puts party ahead of country, or b) really thinks that Canada would be better if there was no opposition. However, with pragmatic solutions on the table, I might be willing to pretend for a while.
There is simply no way that I can support an opposition whose claimed raison d'être is to support the auto and forestry sectors. Supporting auto and forestry WORKERS as they shift into industries with a future is one thing. Helping them make more of a product that plain and simply isn't selling isn't going to fix the mess. i.e. - it would be better to pay them to stay home than to make more cars. Making more cars is ultimately deflationary right now, which is undesirable in the present economic climate. Same goes for forestry.
All plans on the table seek to solve new problems in a new era using old-fashioned solutions that are not appropriate to the present need to stimulate economic development in Canada in a manner that targets sustainability while promoting improved productivity in the long run.
__________________________________
Canada is a thriving multiparty democracy that needs to limit the suffering associated with job losses in the present economy with a strategic eye to creating the conditions that favour entrepreneurship in a sustainable economy.
If any portion of the preceding statement is considered debatable by a significant portion of Canadians, then my understatement of the week is that we could do much better.
__________________________________
I can't f'in BELIEVE we now have a precedent that allows the PM to shut parliament when he doesn't have the support of the majority of elected representatives!!
Making history in Ottawa... the context and the response
I'm just pasting in something I wrote on the 29th about the madness that's going on in Ottawa.
_________________
The Canadian economy produced about $1.3 trillion dollars worth of goods in 2007 at purchasing power parity. During the most recent fiscal year, the federal government budgeted expenditures of well over a quarter trillion dollars, and thus collected a similar amount in taxes.
There is a significant degree of concern these days that the global economy is on the brink of a serious collapse, with some economies already experiencing negative growth. The origins were largely in credit markets (for reasons I’d rather not get into at the moment), while surging commodity markets surely didn’t help.
Intense fear of insolvency among debt-carrying companies with currently low cash flow, concerns about excessively leveraged positions among financial institutions and the risk of job losses among families have created a lot of problems. Together, they have combined to decrease corporate investment and employment, increased the cost of borrowing or turning over debt and have decreased planned expenditures among households.
With the markets gummed up as they are, governments across the world are faced with the sheer inadequacy of monetary policy measures that increase monetary supply and reduce interest rates. Even built in fiscal measures such increasing unemployment payments in downturns and decreasing tax collection in a downturn are widely expected to be grossly insufficient to keep the economies of the rich world out of a severe downturn.
As such, most countries around the world have proposed significant financial stimuli to help prevent severe global recession.
Our glorious leader’s response?
Well, there’s nothing but global turmoil and confusion going, and the rest of the parties are broke after fighting a surprise election this fall, while the most serious challenger is presently looking for a new leader. When, oh when, would the Conservative Party ever find a better time to put their grand vision of Canada into place?
The proposed response includes NO significant fiscal measures, proposes that it should be illegal for the public service to strike and proposes decreases in taxes sometime after the next budget.
Despite such inaction, however, we are in such a severe downturn that the politicians must share our pain. This means cutting, completely, the voter subsidy where each vote translates into $1.95 for the party that is supported. This was put into place by Chretien after he put an end to the potentially corrupting role of corporate and union donations, balanced by the inherently democratic practice where one’s vote contributes directly to the ability of one’s preferred party to participate in our democracy.
The Conservative Party is rolling in money right now, whereas the rest of the parties just came out of a surprise election in debt, and are counting on this vote-based funding to pay off campaign debts and prepare for participation in future campaigns.
Meanwhile, Canada’s national debt stands at about 25% of GDP, the lowest in the G7, and less than half of what it was 15 years ago. For comparison, members of the EU are required (particularly in good times) to keep their annual deficit at less than 3% of GDP.
Most countries are generally being urged to allocate at least 2% of GDP towards a fiscal stimulus. Harper’s priority has been to SAVE money (rather than offer economic stimulus by spending it) by eliminating vote-based funding of political parties, which presently costs about one ten-thousandth of government expenditures and totals about 0.02% of GDP. Not only is it in the wrong direction, but it’s absolutely insignificant.
This is a clearly calculated move to destroy the capacity of the political opposition to wage political campaigns in a time when fundraising is next to impossible, likely because it was expected that in their currently indebted position the opposition parties would be unwilling to fight. The world is heading into the abyss (well, not really), and Harper’s number one concern appears to be strategic partisan interests.
Y’know, I can just imagine a bunch of the guys in the Conservative war-room in August thinking …. Hmm… how do we respond to the credit crises? Then, one brilliant mind says, “we call a surprise election, bleed the opposition of their funds, leave them indebted, then propose that politicians have to share the pain and completely eliminate the voter subsidy, thus cementing our hold on power for a very long time.” The ads against the Bloc suggest that this move was extremely pre-meditated.
Oh yeah, did I mention that there is a clear relationship between the amount of money spent in a campaign and the amount of votes that a party gets?
Y’know, I’m willing to accept that politicians decide to do things that I don’t like. I don’t like it, but I respect the fact that people think differently from me. It’s one of the great strengths of our society. It’s the beauty of democracy. Many voices competing in a political system offer greater opportunities for innovative and practical ideas to bubble to the surface.
Our glorious leader seems to think that our country would be a better place if there was only one voice.
A few days ago, beguiled by statements of a desire for cooperation and with an apparent interest in building consensus across the political spectrum, I thought that the guy was growing into his role as prime minister.
It is now clear that our prime minister is a man of vision for nothing but intense partisanship. Harper playing nice is an indication that he has something up his sleeve.
I used to laugh at the notion of a hidden agenda. Next on my agenda is to figure out just what would be on the wish list of the Conservative base. Apparently number one is destroying the opposition.
If there is one thing I have learned this week, it is never to trust a confrontational politician who all of a sudden starts to play nice. It’s seems incredibly obvious, but in the context of the challenging economic situation across the globe, I think the collective delusion and naivety should be forgiven.
We wished upon a star that we could have a leader who was worth respecting. It seems that if it is to come to pass before the next election, such a leader will have to be found among the ranks of the majority of MPs who are found in opposition.
For the time being, perhaps our glorious leader could pretend and we could play along for a while.
A funny thought just crossed my mind though … wouldn’t it be extraordinarily funny if Dion were to walk up to Harper in the House of Commons on Monday, given him a bloody nose, then pull the rug out from under his feet? I mean, I know Dion’s a little guy, but I think democracy would be well-served by some prime-time hand-to-hand confrontation between the leaders of out two largest parties. I mean, let’s see who really got the brawn.
Sorry, but I will never respect political leaders who put partisanship ahead of their country.
_________________
The Canadian economy produced about $1.3 trillion dollars worth of goods in 2007 at purchasing power parity. During the most recent fiscal year, the federal government budgeted expenditures of well over a quarter trillion dollars, and thus collected a similar amount in taxes.
There is a significant degree of concern these days that the global economy is on the brink of a serious collapse, with some economies already experiencing negative growth. The origins were largely in credit markets (for reasons I’d rather not get into at the moment), while surging commodity markets surely didn’t help.
Intense fear of insolvency among debt-carrying companies with currently low cash flow, concerns about excessively leveraged positions among financial institutions and the risk of job losses among families have created a lot of problems. Together, they have combined to decrease corporate investment and employment, increased the cost of borrowing or turning over debt and have decreased planned expenditures among households.
With the markets gummed up as they are, governments across the world are faced with the sheer inadequacy of monetary policy measures that increase monetary supply and reduce interest rates. Even built in fiscal measures such increasing unemployment payments in downturns and decreasing tax collection in a downturn are widely expected to be grossly insufficient to keep the economies of the rich world out of a severe downturn.
As such, most countries around the world have proposed significant financial stimuli to help prevent severe global recession.
Our glorious leader’s response?
Well, there’s nothing but global turmoil and confusion going, and the rest of the parties are broke after fighting a surprise election this fall, while the most serious challenger is presently looking for a new leader. When, oh when, would the Conservative Party ever find a better time to put their grand vision of Canada into place?
The proposed response includes NO significant fiscal measures, proposes that it should be illegal for the public service to strike and proposes decreases in taxes sometime after the next budget.
Despite such inaction, however, we are in such a severe downturn that the politicians must share our pain. This means cutting, completely, the voter subsidy where each vote translates into $1.95 for the party that is supported. This was put into place by Chretien after he put an end to the potentially corrupting role of corporate and union donations, balanced by the inherently democratic practice where one’s vote contributes directly to the ability of one’s preferred party to participate in our democracy.
The Conservative Party is rolling in money right now, whereas the rest of the parties just came out of a surprise election in debt, and are counting on this vote-based funding to pay off campaign debts and prepare for participation in future campaigns.
Meanwhile, Canada’s national debt stands at about 25% of GDP, the lowest in the G7, and less than half of what it was 15 years ago. For comparison, members of the EU are required (particularly in good times) to keep their annual deficit at less than 3% of GDP.
Most countries are generally being urged to allocate at least 2% of GDP towards a fiscal stimulus. Harper’s priority has been to SAVE money (rather than offer economic stimulus by spending it) by eliminating vote-based funding of political parties, which presently costs about one ten-thousandth of government expenditures and totals about 0.02% of GDP. Not only is it in the wrong direction, but it’s absolutely insignificant.
This is a clearly calculated move to destroy the capacity of the political opposition to wage political campaigns in a time when fundraising is next to impossible, likely because it was expected that in their currently indebted position the opposition parties would be unwilling to fight. The world is heading into the abyss (well, not really), and Harper’s number one concern appears to be strategic partisan interests.
Y’know, I can just imagine a bunch of the guys in the Conservative war-room in August thinking …. Hmm… how do we respond to the credit crises? Then, one brilliant mind says, “we call a surprise election, bleed the opposition of their funds, leave them indebted, then propose that politicians have to share the pain and completely eliminate the voter subsidy, thus cementing our hold on power for a very long time.” The ads against the Bloc suggest that this move was extremely pre-meditated.
Oh yeah, did I mention that there is a clear relationship between the amount of money spent in a campaign and the amount of votes that a party gets?
Y’know, I’m willing to accept that politicians decide to do things that I don’t like. I don’t like it, but I respect the fact that people think differently from me. It’s one of the great strengths of our society. It’s the beauty of democracy. Many voices competing in a political system offer greater opportunities for innovative and practical ideas to bubble to the surface.
Our glorious leader seems to think that our country would be a better place if there was only one voice.
A few days ago, beguiled by statements of a desire for cooperation and with an apparent interest in building consensus across the political spectrum, I thought that the guy was growing into his role as prime minister.
It is now clear that our prime minister is a man of vision for nothing but intense partisanship. Harper playing nice is an indication that he has something up his sleeve.
I used to laugh at the notion of a hidden agenda. Next on my agenda is to figure out just what would be on the wish list of the Conservative base. Apparently number one is destroying the opposition.
If there is one thing I have learned this week, it is never to trust a confrontational politician who all of a sudden starts to play nice. It’s seems incredibly obvious, but in the context of the challenging economic situation across the globe, I think the collective delusion and naivety should be forgiven.
We wished upon a star that we could have a leader who was worth respecting. It seems that if it is to come to pass before the next election, such a leader will have to be found among the ranks of the majority of MPs who are found in opposition.
For the time being, perhaps our glorious leader could pretend and we could play along for a while.
A funny thought just crossed my mind though … wouldn’t it be extraordinarily funny if Dion were to walk up to Harper in the House of Commons on Monday, given him a bloody nose, then pull the rug out from under his feet? I mean, I know Dion’s a little guy, but I think democracy would be well-served by some prime-time hand-to-hand confrontation between the leaders of out two largest parties. I mean, let’s see who really got the brawn.
Sorry, but I will never respect political leaders who put partisanship ahead of their country.
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